The U.S. Supreme Court case Smietanka v. First Trust & Savings Bank, 1921, revolved around the issue of estate tax liability for a trust established by a deceased individual prior to their death. The decedent had transferred assets into an irrevocable trust with income payable to his wife during her lifetime and remainder interest going to his children upon her death. After the decedent's passing, the Collector of Internal Revenue assessed taxes on both life and remainder interests as part of the gross estate under Section 402(c) of the Revenue Act of 1918 which included in taxable estates any transfer intended to take effect at or after death. The trustee contested this assessment arguing that since it was an inter vivos (during life) transfer made without contemplation or expectation of imminent demise, it should not be subject to taxation as part of the gross estate. However, in its decision, The Supreme Court upheld that such transfers were indeed taxable under federal law regardless if they were made without contemplation or expectation of imminent demise because they took effect at or after death according to Section 402(c). This ruling clarified how trusts are treated for purposes related with federal estate tax laws.

In the dissenting opinion for Smietanka v. First Trust & Savings Bank, it was argued that the majority's interpretation of Section 402(c) of the Revenue Act of 1918 was incorrect. The dissenting justices believed that this section should be interpreted to mean that only income derived from a trust during its taxable year should be taxed, not all accumulated income since inception as determined by the majority. They contended that taxing all accumulated income would result in double taxation and go against Congress' intent when drafting the legislation. Furthermore, they disagreed with how certain terms were defined by their colleagues and felt these definitions did not align with common understanding or legal precedent.